Claims And Issues

An "Occurrence" for Defense: Alleged Facts, or Causes of Action?

   A new decision by the Federal Fifth Circuit Court of Appeals, under Missouri law, has addressed the question of whether an "occurrence" triggers a defense under a CGL Policy because of the facts alleged against the insured defendant, or because of the causes of action alleged.  (Or, as in this case, because of the facts actually appearing in the record where apparently no lawsuit had yet been filed.)

   In Download Westchester Surplus Lines Insurance Co. v. Maverick Tube Corp. (5th Cir. Opinion Filed December 10, 2009), a panel of the Fifth Circuit answered this question squarely in favor of the facts being the trigger for an "occurrence" to defend under a CGL Policy.

   This is an important and continuing question.  See generally Dennis J. Wall, "Does Insurance Coverage for a Duty to Defend Depend on Causes of Action and Claims Alleged, or on the Facts That Are Alleged?", 14 Coverage 23 (American Bar Association, Litigation Section, LexisNexis January/February 2004).

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If Commercial Construction Loans Default, Insurance and Bond Claims May Follow.

    Fears continue of possible mass defaults on many Commercial Construction Loans.  Fear of Default has been embedded in the Commercial Construction Loan Market for months.  See generally Floyd Norris, "Off the Charts/Construction Loans Falter, a Bad Omen for Banks" p. B3, col. 1 (New York Times Nat'l ed., "Business" Section, Saturday, September 5, 2009).  As compared with the woes of loans for the construction of single-family homes, reportedly "[i]t is in commercial real estate construction -- be it stores or office buildings -- that the pain seems likely to rise."  Id.

    In particular, a research firm cited in the linked article predicts that "the biggest problems are in loans for condominium construction, with 38 percent of all construction loans troubled."  Id.  [Emphasis added.]

    If Commercial Construction Loans go into Default in large numbers, Insurance and Bond Claims will not be far behind.

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Construction Defect Claims and "Occurrrences" in Florida: Chinese Drywall Next.

This is PART TWO of a post begun on August 5, 2009.

Things changed in Florida Insurance Law in December, 2007, mirroring a change in Insurance Law across the nation.

 

That is at least partly because the relevant CGL Exclusion for Damage to Property changed.  The post-1986 standard CGL Coverage Form presently in use provides in relevant part that although there is still an Exclusion for Property Damage to the insured's work arising out of it or any part of it, this Exclusion does not apply if the work in question was performed on the insured's behalf by a subcontractor.

 

With this change in language, Insurance Coverage was extended in Florida to general contractors under their CGL Policies in cases presenting facts which earlier resulted in judgments of no coverage.  E.g., Auto-Owners Insurance Co. v. Pozzi Window Co. (Fla. Dec. 20, 2007, withdrawn and revised opinion substituted on June 12, 2008); United States Fire Insurance Co. v. J.S.U.B., Inc. (Fla. Dec. 20, 2007).  Other Courts in other jurisdictions have disagreed with parts of the Florida experience.

 

NEXT:  Applying these and other rules of Insurance Law to CHINESE DRYWALL CLAIMS.

 

THIS IS PART TWO.  Please Read The Disclaimer.

Construction Defect Claims and an Occurrence in Florida ....

    THIS IS THE FIRST OF TWO PARTS.

   Florida Insurance Law is an example of Comprehensive General Liability Insurance Issues arising from Construction Defect Claims.  Specifically, it is an example of how things have changed in that arena.

    This example begins at the beginning:  with cases involving pre-1986 standard-form Commercial General Liability Insurance Policies.  Looking at the language in those forms and endorsements, and also looking beyond the contract language to the avowed purpose of CGL Coverage, the Florida courts rejected CGL Coverage for many construction defect claims arising from a contractor's faulty workmanship.  Most if not all of these holdings involved damages claims against an insured general contractor for the replacement of its own defective materials and work.  See, e.g., Download LaMarche v. Shelby Mut. Ins. Co. (Fla. 1980).

    Once a construction project was completed, of course, even if the particular CGL Policy contained Coverage for a "Products - Completed Operations Hazard" still such Coverage was specifically excluded under these early forms for property damage to work performed by the named insured arising out of such work or any portion thereof.  Thus, where the named insured was also the defendant general contractor, all work on the construction project was deemed to be the work of the general contractor.  Under these forms, then, there was no Coverage under the general contractor's CGL.  Download Tucker Construction Co. v. Michigan Mut. Ins. Co. (Fla. 5th DCA 1982).

  THIS IS THE FIRST OF TWO PARTS.  Please Read The Disclaimer.

When Property Damage Occurs in Texas.

    On February 13, 2009 the Texas Supreme Court issued a unanimous decision.  The Court reaffirmed its 2008 pronouncement that under a CGL Policy in Texas, "Property Damage" is deemed to "occur" when there is what the Court calls an "actual injury."  The 2009 opinion is so concise and clear in expressing the Court's reasoning that the opinion is quoted here in this regard:

We adopted instead the actual-injury rule, under which property damage occurs during the policy period if "actual physical damage to the property occurred" during the policy period.  As we explained in that [2008] case, "the key date is when injury happens, not when someone happens upon it"--that is, the focus should be on "when damage comes to pass, not when damage comes to light."...  So property damage occurred under the [standard CGL Policies in the case at bar] "when a home that is the subject of an underlying suit suffered wood rot or other physical damage."

Download Pine Oak Bldrs., Inc. v. Great Am. Lloyds Ins. Co. (Tex. Case No. 06-0867, Opinion Filed Feb. 13, 2009). The quoted material will be found on pages 4-5 of this attached slipsheet opinion provided on the Texas Supreme Court website. This decision is also available as 2009 WL 353526 (subscription required).

    In Pine Oak Builders, the Texas Supreme Court went on to hold that there is no duty to defend under a standard CGL containing an Exclusion for property damage to the insured's completed work, where the underlying complaint alleges only property damage to the insured's completed work, even though the Exclusion also contains a standard Exception or Exemption if the damaged work was performed on the named insured's behalf by a subcontractor, and the insured puts on proof that the damaged work was performed on the insured's behalf by a subcontractor.  Id. at 5-7 of the attached slipsheet.

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